HomeMy WebLinkAbout11B - Audit
MEMORANDUM
TO: Mayor & City Councilmembers
FROM: Ralph Teschner, Finance Director
RE: General Overview of Auditing Services
DATE: March 1, 1993
This memorandum is intended to provide you with a brief overview,
historical perspective and level of service our current auditing
firm, George M. Hansen Company is providing the City of Prior
Lake. The purpose is to provide you with some information on a
fairly informal basis.
The George M. Hansen Company has conducted the City's annual
audit for the past 13 years beginning with the 1980 financial
statements. The audits have been prepared in the hi~hest of
professional standards. There are basically three l.mportant
performance criteria which must be accomplished. The audit must
be prepared on an independent basis so as not to compromise the
integrity of the report. Second, an unqualified opinion must
result which means compliance with GAAP (Generally Accepted
Accounting Principals). Finally it must be approved and accepted
by the State Auditor's Office.
The state has had a long standin~ association with the George M.
Hansen company which is a definl.te plus. Also, continuity of
people within as well as the firm itself is key to producing
timely financial statements. As rou know, Richard Ellsworth has
been our contact from the beginnl.ng. It takes a period of years
for either party to train in the other and establish a smooth
working relationship. A great deal of staff time is spent
initially with an audit firm.
They are well established in the field of governmental accounting
which is essential. CUrrently they have as municipal clients the
following cities in the metropolitan area:
Deephaven
Excelsior
Ham Lake
Lakeville
Lexington
Montrose
New Hope
st. Louis Park
The company has been instrumental and very helpful in the City's
computer conversion and in establishing all the necessary methods
and procedures that were inherent during the transition process
from manual to automated. It is also im~ortant to recognize that
they charged no fees for their time l.nvolved. They continue to
make themselves available as a valuable resource throughout the
year without additional compensation.
Cost consciousness however is still an underlying factor that
must be considered during these tax wary times. The last time
staff solicited proposals for purposes of cost comparison
occurred during 1990 with the following results:
4629 Dakota S1. S.E., Prior Lake, Minnesota 55372 I Ph. (612) 4474230 I Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
COMPANY
COST PROPOSAL
$ 8,500.00
8,800.00
8,800.00
9,200.00
16,500.00
Froehling, Anderson, Plowman & Engnell
Abdo, Abdo & Eick
Charles Bailly & Company
George M. Hansen Company
Voto, Tauges, Redpath & Co.
with the exception of Voto, Tau~es & Redpath, all bids submitted
were extremely competitive. Whl.le Staff is familiar with all the
firms and would be comfortable working with anyone of them, it
must be realized that the small cost differential between the
first four would not offset the additional staff time required to
aid them in preparation of the statements.
Though there are a few cities which alternate companies on a
predetermined basis, they are normally the very large cities.
While it has been customary for the majority of cities to retain
their auditor from year to year unless the price dictates
otherwise or they become dissatisfied for some particular
reason.
In summary, Staff is very satisfied with the level of service
provided and is of the opinion change for the sake of change
would not be advantageous for the city of Prior Lake. We are
presently formulating the list of appointments for 1991 which
tentatively includes the George M. Hansen Company to prepare next
year's audit. We would appreciate anr input you may have
regarding Staff's recommendation. Also, l.n the future Staff will
continue to monitor these costs on a bi-annual basis.
* Each of the aforementioned companies asked what our
current audit cost was. staff felt it was unfair to
divulge this information, yet the cost was readily ap~arent
in the current audit that was obtained by each firm, whl.ch in
all likelihood contributed to their lower bid amounts.
** George M. Hansen Company's 1993 fee to prepare the preceding
year's financial statements is $9,650.00 which represents a
very minimal rise over the past three years.